TomAikins

Although the current investment climate for carbon credits is a bright one, the future could hold even more promise – in a very big way. As of now most of the industrialized countries in the world are working under some sort of carbon tax system as prescribed by the Kyoto protocols. However, the world’s three biggest polluters are not: India, China and the U.S. When these countries sign on to the protocols then the market should explode. What are the chances of this happening in the near future? It’s hard to say but it depends, as you may have guessed, on politics.
Politics in the U.S. to start, but also in China. First, though, U.S. President Obama has to make clear what he intends to do this year, if anything, on his carbon credit – or as it’s called in the U.S., cap and trade – policy. He started the year with a very positive agenda and seemed committed to making progress. However, since June his direction and resolve have seemed rather vague. And with the mid-term elections looming in November the situation becomes even more complicated. Republicans look poised to regain a majority of seat in the House of Representatives and also gain in the Senate. This could make passage of any kind of cap and trade legislation difficult because Republicans tend to favor big business and big business figures that cap and trade will cost them money.
So the direction forward in the U.S. will most likely be uncertain until after November 2. And even then it may take a considerable amount of time to get any legislation passed. But if laws mandating carbon offsetting ever do take place in the U.S. the effect on the carbon market will be immense. First, the U.S. itself is a huge market and the demand for certified carbon offset projects will skyrocket.
Secondly, there will be a knock-on effect in regard to China and India. Up until now, justifiably so, China and India have resisted signing on to Kyoto because of the U.S. refusal to do so. If the U.S. agrees, however, then there will be pressure on China and India to follow and it probably won’t take long for them to do so.
And in China’s case there is additional incentive because China is positioning itself as the world leader in green energy technology. It would be very difficult for China to continue on that path without at the same time ratifying the Kyoto protocols. Their rapidly developing stature in this field would be greatly enhanced by their ratification of Kyoto and their participation in some form of carbon emission control. The addition of China would also greatly increase demand as would India’s participation.
So what does the future hold for the global carbon offset market? It all may boil down ultimately to an election that will take place in the U.S. in about six weeks. Then again, it may not. Obama may not have the political capital or will to force through his carbon cap and trade policy even if the Democrats maintain their present level of control in the government.
His primary concern is the American joblessness problem and the economy as a whole so carbon may take a back seat no matter who wins in November. Until then, though, it’s anybody’s guess as to what may happen. Watch for an update after November.

In order to reduce global emissions we all must reduce as many carbon producing activities as possible, and offset the emissions we cannot eliminate by purchasing carbon credits. There are many motives attracting companies and individuals to the carbon market. Many participants are attracted solely by their corporate and private contribution to the impact of global climate change, although public perception of corporate environmental responsibility has become increasingly important. Additionally, a noticeable trend is developing for speculation in the future value of carbon at both corporate and private levels through carbon offset holdings in various registries.
Both the compliance and voluntary markets have seen substantial growth in recent years with recent downward pressure perceived as a direct correlation between carbon prices and reduced industrial output during the recent global economic downturn. As many economies are now coming out of the recession and with ever stringent UN emissions targets coming into force, most experts expect the emissions markets to experience significant growth. Businesses are now more aware of their public perception and social responsibility and are extremely motivated to announce their green credentials.
Many investment banks such as JP Morgan Chase, Morgan Stanley, Barclays and Goldman Sachs have all entered the market place. Nearly every investment bank has set up an environmental markets division and there are now a host of funds that are dedicated to the sector. There are also a number of exchanges where carbon credits are traded and this part of the industry is expected to show huge growth as is the outright sale of credits.
Expectations are high, and estimates of the potential size of a U.S. cap and trade market range from $300 billion to $2 trillion. SBI Energy claimed in their 2009 report that the value of the carbon market has grown from $727 million in 2004 to $118 billion in 2008 globally. One thing is certain and that is that the overall size of the market will continue to grow, especially if the three major countries that are now not part of the Kyoto Protocol – America, India and China – eventually sign on the agreement.
The carbon markets offer a number of enticing factors. If you would like to offset emissions personally or professionally, you can use a carbon calculator to anticipate the amount of CO2e offsets you would require to reach carbon neutral status. Many carbon websites have these on their home page so it is easy to figure out what your carbon footprint actually is.
Alternatively, you may be searching for an ethical investment that may provide potential profits yet ultimately offers many positive effects to our environment. Although U.S. cap and trade may become the catalyst that drives the future of carbon, one should be aware that investment in the carbon markets is highly speculative, and that the prime motivation should always be the environmental benefits.
Whatever your interest, there is one thing that you shouldn’t ignore and that is the opportunity to make a substantial profit from this burgeoning market while at the same time doing something to help the planet.